Balthan Ltd, produces two products, standard and deluxe, and allocates its fixed manufacturing costs using a predetermined overhead rate (POR) based on estimated total overhead for the year and estimated machine-hours for the year. The estimates are: Estimated total overhead for the year Estimated total machine hours to be worked in the year $2,000,000 20,000 The controller is not sure that the estimated costs of the two products reflect the actual costs for which each product is responsible. She is thinking about switching to activity-based costing (ABC). An analysis performed by the accounting department came up with the following information about activities and associated cost drivers for the two products: Estimated Annual Activity Cost Driver Estimated Yearly Overhead Cost Cost Driver Volume for Activity Materials purchasing kg of material in product $200,000 100,000 kg Machine setups Machine setups 800,000 400 setups Inspections Hours of inspection 400,000 4,000 hours Machine operations Machine Hours 600,000 20,000 hours Actual cost driver results for October: Standard Deluxe Product Product Materials purchasing 6,000 kg 4,000 kg Machine setups 10 30 Inspections 200 hours 200 hours Machine operations 1,500 hours 500 hours Balthan Ltd, produces two products, standard and deluxe, and allocates its fixed manufacturing costs using a predetermined overhead rate (POR) based on estimated total overhead for the year and estimated machine-hours for the year. The estimates are: Estimated total overhead for the year Estimated total machine hours to be worked in the year $2,000,000 20,000 The controller is not sure that the estimated costs of the two products reflect the actual costs for which each product is responsible. She is thinking about switching to activity-based costing (ABC). An analysis performed by the accounting department came up with the following information about activities and associated cost drivers for the two products: Estimated Annual Activity Cost Driver Estimated Yearly Overhead Cost Cost Driver Volume for Activity Materials purchasing kg of material in product $200,000 100,000 kg Machine setups Machine setups 800,000 400 setups Inspections Hours of inspection 400,000 4,000 hours Machine operations Machine Hours 600,000 20,000 hours Actual cost driver results for October: Standard Deluxe Product Product Materials purchasing 6,000 kg 4,000 kg Machine setups 10 30 Inspections 200 hours 200 hours Machine operations 1,500 hours 500 hours